Britain faces its worst peacetime fiscal crisis, with the Government borrowing a quarter of the money it spends. Borrowing crowds out the private-sector activity needed for a sustainable economic recovery, and there is a real danger that the Government will eventually have to raise interest rates to sell its debt.
Decisive action is needed. But Conservative plans to make public services more efficient, while well-intentioned, may in practice deliver little. Other Tory policies, such as cancelling ID cards and abolishing regional assemblies, will only scratch the surface. Commitments to ringfence spending on the NHS and overseas aid show a worrying disregard for the dire state of the public finances.
The next government will be forced to make substantial emergency cuts to the major areas of spending, including health, education, pensions and welfare. The Conservatives should be candid about this to prepare the public for the difficult times ahead.
Richard Wellings, Institute of Economic Affairs.
How Should Britain's Public Spending and Tax Burdens Be Measured? by David B. Smith.
Articles on fiscal policy on the IEA blog.
[Photo: M. Holland]